TNAG-0475-FCO40-540-Contributions-of-Hong-Kong-for-costs-on-maintaining-military-1974 — Page 23

1

C.S. 166

RE

CONFIDENTIAL

For discussion

on 4th June 1974

機密

XCC(74)41

Copy No. 3...

MEMORANDUM FOR EXECUTIVE COUNCIL

PKK 10/2

Background

DEFENCE COSTS AGREEMENT 1971 - 76

71 - 768

1) Mr Crowfon

FINANCIAL REVIEW

To see

Ex Co are friday.

2) PA

t

all

44%

(particly paras 7,90 11),

considering

tha

4/6

растерет

The Defence Costs Agreement, as set out in the Memorandum of Understanding agreed between the Hong Kong Government and Her Majesty's Government in November 1971, included provision for a capital contribution of £17 million towards the cost of the Services' building projects over the period April 1971 to March 1976. The agreement contains provision for a review of Hong Kong's contribution as follows:

"'3(i) the contribution will be subject to review at any time:

(a) if the costs of capital works at April 1971 prices

increase or decrease by 50 per cent or more, or

(b) if there is an increase or decrease in the size of the

garrison by more than one major army unit or equivalent, or

(c) if the economy of Hong Kong suffers such a serious adverse change that the continued payment of a contribution at this level can be shown to be an unreasonable burden on the Colony's finances.

The Agreement expires on 31st March 1976.

2

Honourable Members were informed on 2nd April 1974 that, in the light of information that the building costs index prepared by the Public Works Department had, by the end of December 1973 increased by about 53% on April 1971 prices, HMG had formally invoked clause 3(i)(a). During the week beginning 6th May, a team from the United Kingdom comprising representatives of the Property Services Agency and of the Ministry of Defence, held a series of discussion with a Hong Kong team, and at the end of the talks agreement was reached, on an ad referendum basis, on a financial supplement to the original contribution. The advice of Honourable Members is now being sought on the acceptability of this further contribution to the Services' capital works programme.

CONFIDENTIAL

機密